Is Google Its Own Worst Enemy?

There have been lots of “whither Google (GOOG)?” stories in dozens of publications, and no doubt there will be dozens more to come. Some talk about competition from Microsoft (MSFT) on the advertising side, and some talk about how Google hasn’t really had any big hits apart from its ability to coin money on keyword-related search. But Adam Lashinsky’s latest piece for Fortune magazine puts its finger on what I think is one of the biggest issues facing the company: namely, the simple fact that it has become a gigantic entity (and one that is getting more gigantic every day), and it’s hard to be as creative or move as swiftly.

I encourage you to read the whole thing, but a couple of things jumped out at me: one was the fact that Google is hiring on the order of 100 people every week. When Google went public in 2004, it had about 2,000 employees — now it has almost 10 times that many. And with all of those employees, and the billions of dollars that the company brings in every quarter, Google has no doubt developed a bureaucracy of sorts, even if it is a bureaucracy composed of kids in threadless T-shirts riding scooters on their way to the free massage area.

This growth has also led to departures, like the ones that Lashinsky describes — including that of Paul Buchheit, one of the developers of Gmail and the co-founder of FriendFeed.com, who is quoted in the article. As he puts it at the end of the piece:

“I was always so excited at Google, because I didn’t know what would happen next … then I knew what would happen next.”

That may not mean the imminent death of Google — far from it. But it is still a fact that companies cannot grow at the kind of rate that Google has been growing for very long; and when they do grow at those kinds of rates, they almost inevitably become less fun, less creative, less flexible. It’s almost a law of nature. Microsoft still has Nerf toys and free movie nights and that kind of thing too, but does anyone think it is as creative or flexible as it was a decade ago? I doubt it. Not even Bill Gates would make that claim with a straight face. Google’s biggest enemy now is itself, and its own slowing metabolism.

Comments

[gwinner]

While I somewhat agree with what you say, one day in the not so distant future, you will wake up and say:

Gee, 1,000 new business per day signing up for Google Apps, I guess that was a big thing after all.

Or gee, getting people to embed Google Maps, Google Analytics and Google Bla Bla Bla into their web sites, everywhere, that was huge.

Or, gee, Google Friend Connect and OpenSocial, that enabled the the average guy to create a Web 2.0 social networking site, that really was a trendy and spot one idea, especially because they can do it on Google Sites or Google Blogger.

Or, gee, Google Apps Engine, hmmm, now that was a really subtle way to become the Internet application engine.

And then you'll realize that the technology in and the worldwide build out of the "Googleplex" infrastructure has given them an advantage that no one, not Microsoft, not MicroHoo, not Amazon S3, can compete with with. And they funded it with a hugely disruptive search/advertising business model. And they have now figured out how to monetize it while reducing costs for such services to customers. And they have done to Microsoft what Microsoft did to IBM.

And you'll then understand what they were up to and why they are hiring so many people and why they are so secretive about the Googleplex. Because they're increasingly, through the Googleplex, becoming the operating system of the Internet. If that's not a killer app, then nothing is.

But don't feel alone, I know very bright people who work at Google who don't get what Google is up to. If there is a "slowing metabolism", it is made up for in multiples by increased brainpower and scale.

Disclosure: Long on GOOG

[jack dee]

GOOG does face issues. One is the whole issue of moats. While many people wish to believe Google can not be caught it takes just one line of text to leave google. www. insert any text here .com .
Yes goog has the best search right now.
Yes goog is spending faster than my wife in a mall.
Yes goog is cool, goog is the darling of the public.
But I just dont see a good moat. I see what looks like a moat, but when you get close you see that it is only inches deep.

The super research spending is all about trying to create that moat. Tie everyone in before everyone gets spread around. I know a lot of very bright people who buy in to whole "we rock" concept.

Disclosure Long on GOOG.

[globalmacro]

First they malign Google because they're too free-spirited. Now, you malign them because they're not free-spirited enough? What gives, amigo?

[MuddlingInvestor]

Every company faces risks. Every company has problems. The main question is: will company grow? For Google I think yes, as far as they stick to their guns. Lashinsky sees a lot of duplicate work at Googleplex. I see it as a search of the best model. People leaving Google? Great, they will create a lot of exciting new businesses.

Disclosure: long Google.